Changes in the equilibrium interest rate will:
A. affect both the size of the domestic output and the allocation of capital goods among
industries.
B. affect the size of the domestic output, but not the allocation of capital goods among
industries.
C. affect the allocation of capital goods among industries, but not the size of the domestic
output.
D. have no perceptible effect on either the size of the domestic output or the allocation of
capital goods among industries.
Answer: A
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Capital is a(n) ____ variable and investment is a ____ variable.
A. physical; financial B. stock; flow C. asset; liability D. flow; stock
Opening trade between a nation that has “cheap labor” and one that has “expensive labor” will
A. lower the standard of living in both countries. B. raise the standard of living in both countries. C. make some workers less efficient. D. lead to an inappropriate allocation of resources.